Small- and medium-sized businesses account for more than 50 per cent of Canada’s gross domestic product, according to the government of Canada, employing more than 7 million people across the country. That’s why we call them the backbone of our economy and that’s why we need to prioritize their needs when we plan for the future. Has the 2019 federal budget considered what our entrepreneurs needs to keep growing, prospering and creating more jobs?
EY Canada’s 2018 Growth Barometer surveyed small business owners and ranked several challenges standing in the way of their success. Insufficient cash flow topped the list. This speaks to the challenges of the transformative age we live in, where industries are converging, sales cycles are shifting and consumers have abandoned brand loyalty.
To respond to these fast-paced changes, companies are being forced to be agile in their business investments. They need to be able to pivot on their strategy on a drop of a dime, and that requires some extra cash.
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The lack of tax cuts in the budget isn’t directly going to help small business owners in the cash flow department, but the government is taking various measures to help companies address the other two stand-out challenges for small businesses: the lack of skilled talent and the impact of technological disruption.
There’s a known skills imbalance in Canada, where employers are starved for talent well-versed in the latest technologies such as Artificial Intelligence (AI), data analytics, blockchain and others.
Canadians are twice as likely as their peers in the rest of the world to say that widening the skills of current staff is the best way to improve productivity. Our C-suite rates higher investment in education as one of the top three ways for government to boost growth and, in the budget, the government said that’s what it intends to do.
Finance Minister Bill Morneau is earmarking more than $1.7 billion for skills training programs, including a new non-taxable credit to help pay for training fees. The Canada Training Credit provides $250 a year that can accumulate to help pay for future training — up to $5,000 over a person’s career. It’s aimed at getting adult-aged Canadians back to school to bolster their skills, or to learn new ones in the midst of vast technological advances — and hopefully help fulfill the needs of employers for skilled workers.
It’s not a game changer, but this program is a move in the right direction.
The budget also proposes to invest $35.2 million over five years to give businesses access to top global talent when there’s a dearth of qualified Canadian workers – this access can help Canadian businesses stay competitive globally.
Technological disruption is also creating new challenges for small business owners – one of them being cybersecurity. Many entrepreneurs lack the capital or operational structure to enhance their cybersecurity effort. That’s a serious issue when these companies experience growth and are unable to scale up their existing protections. The government is providing $80 million over four years to support Canadian cybersecurity networks to expand research, development and commercialization partnerships, and to increase the pipeline of cybersecurity talent in Canada. This could generate opportunities for entrepreneurs to step up their efforts.
There’s also the promise of Canada-wide high-speed internet access by 2030. This initiative could have a big impact on small business owners in rural areas, could open up new opportunities in the e-commerce sector and allow businesses to access previously untapped customers. It will also be easier for companies to connect with talent regardless of where they live.
Additional opportunities for entrepreneurs may also come from further infrastructure promises in this year’s budget, which include the National Housing Co-Investment Fund and Housing Partnership Framework.
While it’s true Minister Morneau made no changes to personal or corporate tax rates in this pre-election budget, there were certainly measures aimed at addressing some of the pain points. Time will tell whether these are enough to support the growth of our entrepreneurs and small business owners.
Dean W. Radomsky is EY Canada’s Private Client Services Tax Partner and the Calgary EY Entrepreneur of the Year Awards Leader. For more information, visit ey.com/ca/private.